Whirlpool Corporation (WHR) Q1 2012 Earnings Call Transcript

Joseph Lovechio - Senior Director of Investor Relations Jeff M. Fettig - Chairman and Chief Executive Officer Marc Bitzer - President of Whirlpool - North America Michael A. Todman - Director and President of Whirlpool International Larry M. Venturelli - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Corporate Controller and Chief Financial Officer of Whirlpool International

Eric Bosshard - Cleveland Research Company David S. MacGregor - Longbow Research LLC Michael Rehaut - JP Morgan Chase & Co, Research Division Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division Sam Darkatsh - Raymond James & Associates, Inc., Research Division Joshua Pollard - Goldman Sachs Group Inc., Research Division

Good morning, and welcome to Whirlpool Corporation's First Quarter 2012 Earnings Release Call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Senior Director of Investor Relations, Joe Lovechio.

Thank you, and good morning. Welcome to the Whirlpool Corporation First Quarter 2012 Conference Call. Joining me today are Jeff Fettig, our Chairman and CEO; Mike Todman, President of Whirlpool International; Marc Bitzer, President of Whirlpool North America; and Larry Venturelli, our Chief Financial Officer. Our remarks today track with the presentation available on the Investors section of our website at whirlpoolcorp.com. Before you begin, let me remind you that as we conduct this call we will be making forward-looking statements to assist you in understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K and 10-Q as well as in the Appendix of this presentation. Turning to Slide 3. We want to remind you that today's presentation includes non-GAAP measures. We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We also think that the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operation. Listeners are directed to the Appendix section of our presentation beginning on Slide 36 for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. With that, let me turn the call over to Jeff. Jeff M. Fettig: Well, good morning, everyone, and thank you for joining us on the call today. As you saw earlier this morning, we released our first quarter financial results. Overall, we had a very strong start to the year as we benefited from our margin expansion efforts and our continued innovation investment. Our previously announced and implemented cost-based price actions, along with our cost-reduction initiatives, have put us on track to deliver our full year 2012 guidance. We have particularly strong operating performance in our North America and Latin America regions. In fact, in North America, ongoing operating business profits tripled year-over-year despite a 10% industry unit decline in demand. I think the strength of our global brand portfolio is evident as we continue to see strong consumer preference for our innovative new product launches, which, overall, is driving very positive mix in many of our key markets. And despite the weaker-than-expected demand, our working capital in the first quarter is at a record low, driven largely by lower inventory levels. As a reminder, during our last call, we clearly defined what we call our ongoing business operational performance, which excludes unusual items, restructuring expense and tax credits. You can see our results for the quarter on Slide 6. Sales were relatively flat despite weaker appliance demand, unfavorable currency and the effects of a lower BEFIEX monetization. Our diluted earnings per share from ongoing business operations improved to $1.41 a share compared to $0.64 a year ago with our operating earnings more than double. And we saw year-over-year improvements in our free cash flow from business operations, which we'll discuss in detail later. Turning to Slide 7. You'll see a summary of our current demand outlook for the year. Overall, our outlook remains unchanged as we continue to expect flat to slightly positive demand growth around the world for the year. However, in different parts of the world, we've seen a slower start to the year, but overall, globally, we see the same demand levels as we originally forecasted. In North America, we're currently seeing demand trending towards the lower end of our previous flat to plus 3% range. In Latin America, in part due to a continuous -- continuation of the Brazilian tax holiday program, combined with strong underlying economic fundamentals both in Brazil and other Latin American countries, after a very good first quarter, we see demand at the high end of our plus 2% to plus 5% range for the region for the year. In Europe, we continue to forecast an industry decline ranging from minus 2% to minus 5% for the full year as consumer confidence in the Eurozone remains weak. And finally, in Asia, we expect our full year demand in Asia to be at the lower end of our previously stated plus 2% to plus 4% after a relatively weak demand level in Q1. I'll now turn to Slide 8, which shows our key business drivers for the year and how they are tracking versus our previous guidance. As I mentioned, overall, we continue to benefit from the already announced global cost-based price increases. As we progress through the year, we will comp against the 2011 global price increases, so we do expect price/mix to continue to be a positive driver of margin expansion throughout the year, but at a lesser rate than we saw in the first quarter. Our restructuring costs and capacity initiatives are on track and these benefits will ramp up and accelerate throughout the year in 2012. In addition, we will continue to bring the cadence of strong innovation which will contribute to the overall improvement in our revenue growth, our mix and overall operating profit. And finally, we estimate raw material inflation to be at the higher end of our $300 million to $350 million range, but we still expect to more than offset all this inflation through strong productivity benefits, which will ramp up in the second half of the year. So overall, we're pleased with the very good start in the first quarter. We are -- as we look out through the rest of the year, we believe we are on track to deliver our EPS and free cash flow guidance for the year. At this point in time, I'll turn it over to Marc Bitzer for an update on our North America operations.

Thanks, Jeff, and good morning, everyone. Let me start by giving my perspective on North America's performance for the quarter. As shown on Slide 10, overall U.S. industry unit shipments decreased 10% during the quarter. Despite a very weak industry demand, our ongoing business operations margin grew to 6.7% during the quarter, up from the 2.3% in the prior year. This is largely the result of our previously announced and fully implemented cost-based price increases and an overall improved product price/mix. It is important to note that our market share is up sequentially, which clearly speaks to the success of our innovation in the marketplace and our flawless execution of the price increases. Raw materials continued to be a headwind for us, and we have announced an additional cost-based price increase effective July 1. In addition, our cost and capacity-reduction initiatives are on track for the region. Turning to Slide 11. Net sales of $2.2 billion decreased 1% from last year driven by an overall unit volume decline. We saw our North America unit shipments down 7% in the first quarter, which is slightly ahead of the U.S. industry decline of 10%. Operating profit reached $151 million versus the $59 million in the previous year. Ongoing business operating profit was also $151 million as compared to $52 million in 2011, which means we nearly tripled our operating margin. Turning to Slide 12. You can see just a few examples of our innovative cooking product launches. You also see a picture of our new Cleveland, Tennessee manufacturing facility. The facility officially opened early this month and includes a state-of-the-art production facility and distribution center and will be the largest premium cooking plant in the world. As demonstrated by our improving market share, despite our cost-based price increases, it is clear that our innovation is a competitive advantage and key to our success in the marketplace. We have a strong cadence of new product innovation planned throughout the year. I want to highlight the progress we've made against our business priorities for North America during the quarter as you can see on Slide 13. As mentioned before, we have successfully implemented our cost-based price increases, but the cost and capacity reduction initiatives as well as our ongoing productivity programs will ramp up during the second half of the year and are on track to generate the expected benefits. We were also able to leverage our strong product innovation during the quarter, realizing not only sequential margin improvements but sequential share gains. Now before I turn it back over to Mike, I want to take a moment to address the recent ITC decision related to our bottom-mount refrigerator antidumping petition. We know the fact clearly demonstrated that bottom-mount refrigerators from South Korea and Mexico were being dumped in the United States market. And in March, the Department of Commerce confirmed that, in fact, dumping has occurred, and issued a final antidumping and countervailing duty determination, assigning both antidumping and countervailing duty margins. Obviously, we are extremely disappointed with the ITC decision and we will explore every option, including appeal to resolve the apparent disconnect between Commerce's final determination that dumping is occurring and the final ITC determination that these dump imports did not cause injury to the U.S. industry and their workers. In addition, and this is very important, going forward, we will continue to monitor foreign producer behavior in the marketplace. If we see a reversion to the dumping activities that prevailed prior to 2012, we will take all appropriate legal actions. It's very important to know that this decision does not influence the actions that we took last December when we filed antidumping and countervailing duty petitions for large residential clothes washers from South Korea and Mexico. Now I'd like to turn it over to Mike for his review of our international operations. Michael A. Todman: Thanks, Mark. You'll find an overview of our international business performance on Slide 15. We had solid performance in our Latin American region, both within and outside of Brazil. The region reported sales of $1.3 billion, up 3% from the prior year period, with appliance unit shipments up 2%. Excluding the impact from currency, sales increased 7%. We saw improved price/mix across the region. There was strong demand for T3 products, which include washing machines, refrigerators and ranges. While it was previously discussed, we elected to move away from lower-end, unprofitable microwave ovens and air conditioners. Strong sales and product price/mix gains were partially offset by higher material costs and lower monetization of Brazilian BEFIEX tax credits. As we discussed on the last call, the Brazilian government declared an appliance sales tax holiday in December. The program, originally set to expire on March 31, was extended for an additional 90 days through June 30, 2012, as expected. Irrespective, however, of the stimulus program, we continue to be very positive about the prospects for our Brazil and Latin American international business. Europe remained challenging during the quarter with continued weak consumer demand across the Eurozone. Our cost-based price increases and cost-reduction initiatives are expected to progressively yield margin improvement sequentially throughout the year. In Asia, Q1 industry demand in India and China was lower than expected. China's economy grew at its weakest pace in nearly 3 years in the first quarter of 2012, and inflation in India continued to dampen demand. However, we continue to expect recovery throughout the year as we comp against easier numbers. If you turn to Slide 16, you'll see our Latin America first quarter results. Operating profit for the quarter totaled $121 million compared to $174 million in the prior year. Favorable product price/mix was offset by lower monetization of tax credit, unfavorable currency and higher material costs. On an adjusted basis, excluding Brazilian tax credits, operating profit for the quarter totaled $114 million compared to $108 million in the prior year period. Turning to Slide 17. In the first quarter, our Europe, Middle East and Africa sales decreased 8% year-over-year to $688 million with unit shipments down 4% compared to the prior year period. Excluding the impact of currency, sales decreased approximately 3%. Operating profit of $5 million improved sequentially from the $32 million fourth quarter loss, but was down from last year -- prior year of $25 million. Our first quarter results in the Asia region are shown on Slide 18. Net sales decreased 3% during the quarter to $202 million, down from $208 million in the prior year period with unit shipments increasing 1%. Excluding the impact of currency, sales increased approximately 2%. The region's operating profit was $9 million for the quarter compared to $11 million in the prior year. Overall, favorable product price/mix and volume growth was more than offset by unfavorable currency and material costs. Turning to Slide 19. You can see just a few examples of our international product launches during the quarter. In addition to the products you see here, our Bauknecht brand expanded into Hong Kong, allowing us to reach consumers in super premium segment in that growing market. And in Latin America, we've launched the region's first premium front-load laundry pair leveraging our new global laundry platform for Brastemp brand consumers. And in India, starting in March, we are launching more than 150 new products during the year across 6 appliance categories, the largest launch in the region's history. The products deliver innovation, designs and features that consumers want and at price points that make the products accessible to every consumer segment. In China, as you will see on Slide 20, we established a strategic alliance with the retailer, Suning, expanding our ability to large numbers of consumers through a respected trade channel. As part of the strategic alliance, we have preferential access to Suning's national distribution network of 1,700 retail outlets throughout China and preferential access to fast-growing market segments into China's smaller but faster-growing cities. This relationship demonstrates our strong commitment to the China market. Suning's distribution network, as well as its excellent reputation as a leading electrical appliance retailer in China, make it the ideal choice for this partnership, which is a key enabler to our China growth strategy to become the leading international appliance brand in China and grow our domestic sales to $1 billion over the next several years. Turning to Slide 21. You'll see the progress our international business made towards our operating priorities. While demand remains soft in some markets, we are beginning to see signs of growth returning for our business in emerging markets. Our margin expansion efforts are on track through improved price mix, productivity and realizing the committed restructuring benefits. And lastly, we are supporting our business with a strong year of innovation, which is driving the growth and price/mix improvements we are seeing across the company. Now I'd like to turn it over to Larry Venturelli for his financial review. Larry M. Venturelli: Thanks, Mike, and good morning, everyone. First, let me start by putting into context our first quarter performance relative to full year guidance. During our last call, as shown on Slide 23, we guided to annual GAAP EPS of $5 to $5.50 per share and ongoing business operations EPS of $6.50 to $7. Free cash flow guidance was $100 million to $150 million with our ongoing business cash flow of $950 million to $1 billion. Our first quarter results are well on plan to deliver annual guidance, which we are reconfirming this morning. You may recall that guidance reflected essentially flat industry growth for the year and was based on margin expansion, driven from price and mix improvement; restructuring benefits from our costs and capacity reduction programs; ongoing productivity, which we expect during the second half of this year; the loss of material cost headwinds; and finally, we are increasing our marketing investment to support a significant new product innovation we're introducing this year. As we discussed on our last call, we expect annual ongoing business operating profit margin to be between 5.5% to 6%. On Slide 24, you'll note that our ongoing business operating profit margin essentially doubled from 2.7% in Q4 to 5.3% in Q1, essentially at the bottom of our full year range. We are very pleased with our margin progression and remain confident in our guidance for the year. On Slide 25, you'll note that for the quarter, GAAP EPS was $1.17 per share compared to $2.17 last year. It's very important to note that last year included $1.54 per share for BEFIEX tax credits and the energy tax credit program, which was not extended this year. Our 2012 first quarter results reflect only $0.08 per share from the BEFIEX tax credits. Adjusting for restructuring expense and the previously mentioned tax credits, our ongoing business operations delivered $1.41 per share, more than doubling from the $0.64 last year. Slide 26 shows the drivers of our year-over-year ongoing business operations improvement, which was entirely driven by margin expansion. Price/mix contributed approximately 4 points to our margin expansion during the quarter. We expect strong year-over-year price mix for the first half of the year and will begin to comp against last year's price increases during future quarters. Our cost and capacity reduction program is on track and contributed proximately 1 point to margin improvement. We remain confident in achieving the $200 million or 1 point of margin improvement this year as these benefits continue to build throughout the year. And additionally, we expect 1 point of margin improvement from this program in 2013. We did generate approximately 0.5 point of margin improvement from normal productivity. Our productivity, consistent with our project pipeline, will build throughout the year and we expect to more than offset material headwinds during the second half of this year. Material headwinds negatively impacted margins by approximately 2.5 points. And as Jeff mentioned, we currently estimate headwinds to hit the higher end of our previous 3 to 3.5 -- $350 million range. In summary, delivering a 5.3% ongoing business operations margin during the first quarter, which is our lowest volume quarter of the year, puts us well on track to achieving our annual guidance of 5.5 points to 6 points. I wanted to briefly discuss 3 items. First, our effective tax rate was 27%, which was consistent with our annual guidance of 26% to 29%. And It's important to note that last year, we benefited from $54 million of energy tax credits. Secondly, restructuring expense was $34 million, up significantly from last year. Slide 29 illustrates that we continue to expect the total expense of our restructuring program to be approximately $500 million through 2013. And as I previously mentioned, we are own track to deliver the $200 million in benefits in 2012 with an additional $200 million of benefits in 2013. Thirdly, BEFIEX tax credits, included in our GAAP results, was $7 million compared to $66 million last year. The biggest driver of this decrease was a tax break program initiated by the Brazilian government, which reduces the amount of BEFIEX credit we are able to monetize. The program, which started December 1, 2011, was extended an additional 3 months through June 30, 2012. During our last call, we told you that our 2012 guidance includes $60 million to $80 million of BEFIEX credits compared to 260 million -- $266 million recognized in 2011. We modeled our 2012 guidance similar to the government's previous program, which was extended to 9 months. Should the current 7-month program not be extended to 9 months, we would be able to monetize additional credits of approximately $45 million. And just as a general reminder, both restructuring expense and BEFIEX credits are excluded from our ongoing business operation results and guidance, along with last year's energy tax credits and other one-time items. Moving to our free cash flow results on Slide 30. As expected, we reported a free cash flow use of $515 million for the quarter, compared to a use of $336 million last year. These results include the final installment of $275 million related to the Brazilian collection dispute. In comparison to last year, we also had higher pension contributions, higher restructuring cash outlays and significantly lower monetization of BEFIEX tax credits. Slide 31 depicts the underlying cash flow through our operations after taking to account these short-term cash requirements. As you can see, we are driving improvements in our cash flow from ongoing business operations as we largely put our legacy legal liabilities behind us this year. Overall, working capital is at a first quarter record low, driven largely by lower inventory levels. On Slide 32, you'll see that our 2012 cash priorities remain funding the business, including capital expenditures and pension contributions; dividends; as I've previously mentioned, funding the remaining legacy legal liabilities, which will largely be behind us after this year; and debt repayment. Now I'll turn it back over to Jeff. Jeff M. Fettig: Well, let me sum up our comments today. As you heard, we are on pace to deliver our earnings and cash flow guidance for the year. Even as we continue to expect flat to slight demand improvement, we are executing very well against all of our key initiatives and remain confident in our ability to meet our margin expansion targets. Overall, we delivered a very strong first quarter, and we expect the full year 2012 to be a very strong year of operating profit performance improvement. Long term, we remain very confident in the opportunities that we see to grow the business as we've outlined in Slide 35. In shorter term, we will continue to rapidly adjust our overall business to adapt to changes that continue to take place in the overall global marketplace. So with that, I'll conclude our formal remarks. And at this point in time, I'd like to open it up and take any questions that any of you may have.

[Operator Instructions] With that, we'll take our first question from the side of Eric Bosshard. Eric Bosshard - Cleveland Research Company: Curious about North America, specifically. You showed good progress with price and units obviously were softer, I think softer than what you would have expected. As you look through the balance of the year, how are you seeing retailers respond to how things played out in 1Q and if you think this is a sustainable situation?

Eric, it's Marc. Let me try to answer your question, put it into 2 different buckets: one is the units, the other is the pricing, as you mentioned. First of all, unit. As we reported, units were down on industry shipments, 10%, which is slightly worse than we expected. At the same time, you got to also know that during the quarter, we saw quite a bit of trade inventory reduction, which is, as you know, difficult to peg, but I would peg it at around 3%. So through sell-through about probably minus 7%. And in addition, if you compare to previous year quarter, there was industry inventory build. So you've got to take that into account. With that in mind, we still forecast the full year industry shipments to be roughly flat, which is at the low end of our previous guidance. So that's the unit side. On the pricing, our pricing stuck. But what is more important even is the quality of our pricing because it was not just like-for-like, we also had a very strong mix in our Q1 performance and we see that continuing. So we remain, in fact, very confident at our full year, which is in line with our previous guidance. Eric Bosshard - Cleveland Research Company: I guess to refine the question a little bit, how are the retailers looking at pricing and promotion? With sell-through down 7% in the first quarter, how are they thinking about the balance between unit sell-through and profitability?

And Eric, and as you know, most major retailers, they report their numbers in a month from now. It's a good thing, but I would argue that most retailers see similar benefit as we have. You can sustain a softer unit environment if your price realization for the entire industry value chain is healthier. But it's too early to say that. And at the end of the day, we've got to waive off the retailers' report. Jeff M. Fettig: Yes. Eric, this is Jeff. I would add just maybe to Marc's comments is this is really, as we talked about, particularly at the second half of last year, this is a replacement market. As we look through the data and see the type of purchases, it's not a discretionary market due to where consumer confidence is now. If you look at the retailers that have reported over -- at this point, the smaller retailers, the ones that are doing well are expanding their margins. They're benefiting from -- they understand that it's a replacement market. They're benefiting from margin improvement and they're getting comp store sales increases because of those higher revenues. And that's something that, I guess, as you think about it, being a fundamental replacement market is easy for them to understand. Eric Bosshard - Cleveland Research Company: I guess following on to that, you commented that you thought price/mix would be the most favorable in 1Q and would ease a little bit 2Q to 4Q. It sounded like that was a function of comparisons. But should we be thinking that there's any change or erosion in what took place in the 1Q on the price and promotional change? Help us understand a little bit better if you would. Jeff M. Fettig: Yes, Eric. No, that is not the case. What we talked about, the plus -- 4-plus points of price/mix in Q1 year-over-year, it's based on the comparison. As you perhaps recall, we began -- it varied per market, but we started -- we had a very significant price increase in North America, I think, April 1 of last year. So the issue -- it is not an erosion of current pricing or mix, it is a comparison of against the pricing we took last year.

Eric, it's Marc Bitzer. In addition to this one, first of all, the 4% that Jeff referred to is globally. North America was north of that number. The other thing is we have announced a price increase July 1 so that is already out there in the market, and we are executing that.

We'll move next to the side of David MacGregor. David S. MacGregor - Longbow Research LLC: I guess just on the price increases, if we could pick up from where you just left off, Marc. What percentage of your current North American revenues will be impacted by that? My understanding is this is going to be a more selective kind of a price increase. I'm just trying to get a sense of breadth here.

David, it's Marc Bitzer. We don't communicate the details. I mean, of course, our trade firms make up the price list and that is well out the market. I can only characterize in general terms, it's not in the same magnitude as the April last year one, but it's -- we're serious about this one and we have real mature cost increases, and we'll reflect them in our cost-based price increases. David S. MacGregor - Longbow Research LLC: And to what extent have all your competitors gone along with this, so far?

David, honestly I can't comment on -- you probably need to ask -- sorry. David S. MacGregor - Longbow Research LLC: And I know it's pretty difficult to -- doing business in Europe right now, but presumably you've got raw materials cost inflation there as well. So how do you go about securing a price increase in Europe if, in fact, that's possible right now? Michael A. Todman: Well, David, as you know -- this is Mike Todman. We announced price increases in Europe and we're in the process of executing them. We actually did see some positive price mix in the first quarter. We expect for that to progressively get better as we go throughout the year. And then we're just being -- we're sticking to and committed to the increases that we've announced.

We'll move next to the side of Michael Rehaut. Michael Rehaut - JP Morgan Chase & Co, Research Division: First, just going back to better understanding pricing relating to the raw materials. Conceptually, should we be thinking that the price increase announced for July 1 to roughly offset the impact of the higher raw materials, is that a good way to think about it and maybe not just in North America but to the extent that you're trying to do this on -- continue to push price on a global basis?

Mike, it's Marc. Let me just comment on North America. The answer is yes. So July 1 is conceptually reflecting the real material cost increases we have, as well as the last 4 ones also reflected a long-term trend of material cost increases. Jeff M. Fettig: Michael, the more micro question globally is absolutely we do expect to offset raw material increases in part via price and the other part productivity, not only in North America but around the world. We have already announced in -- either implemented or have announced in other markets in Latin America and India and other places, price increases also where we have high inflation. When you have a high inflation environment, there's really not any other options other than to do that. Larry M. Venturelli: Yes, Michael, this is Larry. Just for reference, if you go back to the last 3 years including 2012, we're absorbing close to $1 billion of higher material cost inflation, so we obviously are taking up pricing to recover that. Michael Rehaut - JP Morgan Chase & Co, Research Division: Great, I appreciate that. And just as a follow-up, thinking about margins on a longer-term basis, kind of a two-parter. One, can you just remind us how you are thinking about incremental operating margins company-wide for incremental sales? What is that on an incremental margin basis -- operating margin basis? And if you can also, longer term, kind of walk us through from a timing perspective, the 8% consolidated operating margin goal that you've laid out in the past. I believe on your Analyst Day a year ago, correct me if I'm wrong, I think you were thinking that, that could be achievable by 2015, was it? And if there's just any update on how you're thinking about that playing out. Jeff M. Fettig: Yes, Michael, this is Jeff, let me take the last part first. Actually the day we had talked back to the -- actually fall of 2010 when we had the Investor Day, we outlined our expectations to drive the business to at least 8% plus operating profit by 2014. And as I said, last fall and in February, our expectations haven't changed. Clearly, last year was a setback, given the environment. But as we announced last October, we took very strong actions with our #1 priority being margin expansions. So this year, based on what we gave in the guidance and what we've outlined in our plans, we expect to be at 5.5% to 6% operating profit this year. We also, as a reminder, will have next year approximately $200 million, which is roughly a full point restructuring benefit in addition to what we get there. And we will continue investing in innovation. We will continue to do the things that we need to do to drive mix and expand margins. But we reiterate, it was our expectations that we'd get to the 8% plus by 2014. Now shorter term, your question, I'll turn it over to Larry. Larry M. Venturelli: Yes. And just to add to Jeff said, Michael, in that guidance, we're not assuming a huge improvement in demand in the global industry when Jeff talks about that margin. And we believe that we have the visibility to get there based on the things that we can control. The question you asked on incremental margin, if you look at our business and the costs that we've taken out over the last several years, our cost of goods sold is highly variable in nature today. And if you look at our SG&A, it's, I would say, split between variable and fixed, so that should help you with your incremental question.

We'll move next to the side of Ken Zener. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: It's too bad the ITC ruling doesn't sync with any logical extension of what dumping damage means. And I'm interested if you guys have a better understanding of what damage to an industry means. But with the U.S. volume down as much as it is, it does stand in contrast to consumer recovery we're seeing in some other durable items, housing, nascent [ph], cars. Can you comment on the apparent disconnect and if in your opinion, how it might be related to price? I know you talked about the absence of elasticity, but it does seem surprising that the volume is not clicking up at all.

Kenneth, it's Marc Bitzer. Let me just try to answer that. First of all, on the question as to why it's more -- of more instant [ph] recovering. I would argue without being too much [indiscernible], the rational factors when you look at housing affordability, mortgage rates, housing costs would speak in favor of a faster recovery of the demand, what stands in the way is still consumer confidence, which is still lagging behind. We do not expect a major recovery of consumer confidence until the end of the year. And that will be the center point in terms of when see the industry improving. So I think it's already in the back of consumer confidence, not necessarily the rational factors. They would clearly speak in favor of a faster recovery. The second point of your question, pricing versus demand. As Jeff mentioned before, we're basing our intention in all replacement markets, which historically has been and is now also confirmed is not elastic to pricing. It's just not -- I mean, if you're a replacement consumer, you buy and that is not necessarily driven by if there's a 10% discount or not. Jeff M. Fettig: The only thing I'd add, Ken, is that again on the pricing question, I mean, if you look at our average pricing, all of those are still below where they were 3 years ago. So in a time where we had tremendous inflation, and to reinforce Marc's point, is the business that we are seeing is upgrading the mix. So again, I stick by what we said. I don't think pricing has had any impact on consumer demand in this market. On the first comment of the ITC, Marc really clearly laid out our position. I'd only reinforce 2 points. One is the Department of Commerce conclusively determined there is dumping taking place in this marketplace from those markets at a large magnitude, particularly for our type of industry. The ITC rule was determined whether that was cause of material damages to the industry, and in this case, Whirlpool. And it is unexplainable to us how that conclusion could have been reached and -- but we will not have the public opinion for probably another several weeks anyway. So until we see that, there's really nothing more we can say about it. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Understood. When you guys get that public opinion, obviously, I hope you continue to post it to your Investor Relation page. The ITC, it's -- you can get things from there, but it's complicated. And is there any just broad comments you could make? Because to us it's unexplainable. However, despite your very rational decisions, you have behavior that might undermine your rational decisions. I mean if there's any color you have to add, I think that would be useful. And has there been any Brazilian land development by competitors? Jeff M. Fettig: I'm sorry what was the last? Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Brazilian land development by your competitors. Jeff M. Fettig: Yes, we can't give a lot of color right now on this other than a couple of points. One, I think anybody who's followed -- follows trade is as shocked as we were about this decision. I think clearly the people who did the work and came to the conclusion there is dumping, it was crystal clear. So in the end, you have a group of folks who have their discussions and deliberations. And that's where they came out and I cannot add any color to that. I can only reiterate Marc's point that we don't accept that outcome based on what we know. And that we were going to continue every avenue possible on all fronts to ensure that illegal dumping in the United States that impacts American investment and jobs is not acceptable in this global trade -- under global trade law. So Larry, you want to talk? Larry M. Venturelli: And I think you asked questions on developments of new manufacturing in Brazil from competitive perspective. And then there's -- from what we've seen so far, no. There has been no new developments from -- and I think you're referring to Koreans.

We'll go next to this line of Sam Darkatsh. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: A couple of questions. First off, I thought, Mike, in your prepared remarks you mentioned that you were walking away from microwave and air conditioning units in Latin America. If true, could you help quantify the impact of that in the quarter on your units? And then also help reconcile -- the guidance for the year for Latin America units, does that include or exclude the walk-away business. If you could help put some color around that. Michael A. Todman: Yes, yes, I will, Sam. First of all, we haven't completely walked away. What we have done is on the lower-end, lower profitable segments of those categories, particularly microwaves, air conditioners, vacuum cleaners, we've just elected not to sell. It actually, if you look at total units, had upwards of 6 points, if you will, on the total unit sales. So it was fairly significant, but it was a decision that we think makes a lot of sense. And as we look at our guidance for the marketplace, in total, we have included a total T9 as we call it in Latin America view. So it includes microwaves, it includes some air conditioners. It doesn't include some of the other items that we sell. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: So we should expect then inferring from your words then that the industry growth closer to the high end of the range less whatever the impact would be, in this case 6 points for Whirlpool units for the year, is that how to look at that? Michael A. Todman: No, actually, let me maybe give you some more specific. If you look at T3 units, in the first quarter, they were up around 20% in the industry. We were up well over that in T3. So if you expand it to the other ones, the industry was up about 11%. And what we said is, right now we've seen this stimulus, if you will, extended the tax holiday through the second quarter. And so that's the only visibility that we have. So we're just calling the industry now up to the high end of our range, 5% and it includes everything, okay? Now the T3, we expect to continue to be higher than that 5%. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: But the 2% to 5% is the T9? Michael A. Todman: That's correct. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay. Last question, and I'll defer to others. There's been some chatter in the marketplace about Daewoo, specifically, coming up for bid and perhaps your potential interest in it. I understand that there's probably some sensitivities around talking about that specifically. But Jeff, could you talk about your appetite for acquisitions and where it might make sense going forward? Jeff M. Fettig: Yes, Sam. First of all, we don't comment on rumors. As Larry laid out our priority for the year in terms of our investments, M&A was not on the priority list. And we're very focused on -- we have some great investments in innovation that we're getting, we expect to get great returns on. Funding the business, funding the dividend and pension, paying off legal liabilities, those are our priorities for this year.

And we have time for one last question. For that, we'll go to the line of Josh Pollard. Joshua Pollard - Goldman Sachs Group Inc., Research Division: There was no change in your guidance post pending what seems like a pretty material piece of business with Suning in China. Is this a relationship that doesn't go into place until 2013? Or do you need to build facility to begin a material ramp? I'm just trying to understand why that isn't having more of an impact on your numbers? Jeff M. Fettig: Yes, Josh. First of all, in terms of the guidance, we're tracking very well through the first quarter after a very strong start. It's April, and so there was no -- we just felt confident in reinforcing the guidance that we have. The Suning relationship has been built over a very long period of time and it is actually driving significant revenue growth off of a very small base in China. So I don't expect -- it will have a material impact on our China business, but that not -- has not yet grown to a size where that's having a material impact on the total Whirlpool business. Joshua Pollard - Goldman Sachs Group Inc., Research Division: So in other words, you guys already have a relationship with Suning. You... Jeff M. Fettig: Well, absolutely. Joshua Pollard - Goldman Sachs Group Inc., Research Division: You went to preferential status. Does that increase your what you would expect to sell to them by 20%, 50%, double it? Jeff M. Fettig: At least double. Joshua Pollard - Goldman Sachs Group Inc., Research Division: Okay. And that's a double over 5 years? Or is that a double as soon as... Jeff M. Fettig: Well, based on where we are now, this year or this year or next year. Joshua Pollard - Goldman Sachs Group Inc., Research Division: Okay, got it. But it's not very significant to your overall business? Jeff M. Fettig: Not yet, but it will be. Joshua Pollard - Goldman Sachs Group Inc., Research Division: Okay. And when I think about for promotions, we're moving a little closer towards the holidays. I wanted to understand how much you budgeted for promotions last year, how that compares to this year and sort of on a quarterly basis, how you guys think about spending those figures.

Josh, it's Marc Bitzer. As you know, we don't give specifics on promotion guidelines several quarters out. I mean, the only comment I want to make, we have said as a key priority, price margin realization is very key. And we will stick within these guidelines, but we will never give specific guidelines on promotion spend per quarter. Joshua Pollard - Goldman Sachs Group Inc., Research Division: Okay. If that's the case, can I sneak one more in? Jeff M. Fettig: Sure, Josh. Joshua Pollard - Goldman Sachs Group Inc., Research Division: I want to follow up on the previous question about your volume of 2% in Latin America. 20% was the industry on T3, you guys are much higher than that. T9 was up only 11%. I'm trying to understand the real impact on your business. Are you saying if you would have had all your normal volumes, your volumes would have been up 8%? Jeff M. Fettig: Yes. Josh, again, the T3 refrigerators, washers and cooking products, that is the predominant revenue source in our business. But over the last several years, microwaves and air con, as far as the T9, have grown very largely. But in short, it was a very cool season, so the air con business was down dramatically. And as Marc reiterated and Mike, our -- we had -- our priority was to -- is to expand margins, so we sold a much, much better mix and we didn't sell a lot of units that were low. So I mean, the fact of the matter is, I mean, the simple answer to your question is on the T3, which is the core part of our business, we were up substantial. The market was up 20%. We were up more than that. So the rest of this stuff was basically profitless units that weren't sold. So with that, we're going to conclude here. But again, I would just end, again we're very pleased with the progress we've made, thus far, in the year. There are some moving parts, but we feel like the actions we've put in place are going to allow us to deliver a very strong year of operating performance. So thank you for joining us today. We'll look forward to talking to you next time.

And this conclude today's program. Have a great day. You may disconnect at this time.